MC algo 5-53 Calculating Annuity Due Present Values You have just leased a car that has monthly payments of $390 for th...

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MC algo 5-53 Calculating Annuity Due Present Values You have just leased a car that has monthly payments of $390 for the next

Answer 1

Answer #1

Number of periods = 3 * 12 = 36

Rate = 7.44% / 12 = 0.62%

Present value = (1 + r) * Annuity * [1 - 1 / (1 + r)ⁿ]/ r

Present value = (1 + 0.0062) * 390 * [1 - 1 / (1 + 0.0062)³⁶]/ 0.0062

Present value = 1.0062 * 390 * [1 - 0.800506] / 0.0062

Present value = 1.0062 * 390 * 32.17641

Present value = $12,626.60

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Answer 2

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